As Connecticut”™s job-creation tax credit nears its one-year anniversary, just one company has given the measure credit for creating jobs in the state.
Harrison, N.Y.-based GlobeOp Financial Services became the first company to take advantage of the tax credit last August, creating a back-office outsourcing operation in Hartford catering to hedge funds. The company has indicated it would add 150 jobs in Hartford.
Since then, a few other companies have either revealed plans for adding a facility in Connecticut, like Goldman Sachs Group Inc.; or have dangled the possibility, such as JPMorgan Chase & Co. and Starwood Resorts and Hotels International Inc.
No company besides GlobeOp, however, has publicly cited the tax break as a motivator to expand or relocate in Connecticut.
Gov. M. Jodi Rell created two corporate tax breaks last year, one which rewards companies that relocate to Connecticut and create at least 50 new jobs, and the other, which gives a tax credit of $1,500 for each worker a company hires who has been recently laid off.
Republicans in the Connecticut General Assembly want to apply the 50-job tax credit to companies that already have operations in the state and want to create meaningful tax incentives to cluster industries in certain locales, much the way hedge funds have flocked to Greenwich.
Another bill passed last year titled “Jobs for the 21st Century” is phasing out a tax on manufacturing equipment.
Given past tinkering with Connecticut”™s corporate income tax, businesses are skeptical of tax proposals on fears future governors or legislators will “claw back” incentives or establish other levies, said Peter Gioia, vice president and economist for the Connecticut Business & Industry Association (CBIA).
By contrast, he pointed to the apparent success of a tax credit for filmmakers who do not have to make a long-term commitment to the state.
CBIA is fighting a proposal in the General Assembly to increase the state”™s individual income tax, which it fears would harm executive recruitment by local companies and spur executives to find ways to declare income in other states.
Steve Greenbush, a broker with CB Richard Ellis, said that for financial companies such as JPMorgan Chase and Goldman Sachs, payroll and facility tax incentives are considered only after more primary business concerns such as the availability of quality space, and a convenient commute for employees. He said tax breaks are more often effective as a final carrot used to close relocation deals, rather than as a way to elicit initial interest from corporate site selection planners.
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“Once companies are serious (about relocating), then Connecticut needs to reach out,” Greenbush said. “But I don”™t think Connecticut needs more (incentives) than what they”™ve already got.”
There is recent quantitative evidence to bear that assertion. Between 2004 and 2006, Connecticut businesses constructed 57 new or expanded facilities, according to Site Selection magazine, more than in any other New England state or New Jersey. Nationwide, Ohio was tops with 1,650 new or enlarged corporate buildings.
While Fairfield County has been the scene of significant relocations as companies grow or shrink the size of their local operations, including moves involving UST Inc., Royal Bank of Scotland and Xerox Corp., those moves for the most part have taken place inside its borders.
At the end of April, the state had yet to find a taker for Bayer Healthcare”™s plant in West Haven, which has been one of the state”™s top economic priorities since November. Bayer Healthcare is in the process of vacating the facility, despite $60 million in various state perks to stay put.
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